Pao Yuen Tung Hsing Yieh Co Ltd v. Pao Hsing Cotton Mill Ltd and Others
Read the full judgment text of HCA 765/1981 on BabelCite. This High Court CFI judgment.
1. This is an action between the Pao Yuen Tung Hsing Yieh Company Limited, Plaintiff, and four Defendants, namely, Pao Hsing Cotton Mill Limited, the estate of Yang Sen Hui (deceased), the estate of Chang Jye An (deceased) and the estate of Tung Teh Mei (deceased). The Statement of Claim which accompanied the writ was issued on 3rd February, 1981.
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HCA000765/1981 Headnote: Four applications to strike out Statement of Claim on grounds:- (a) Laches (All Defendants). (b) Delay such as is caught by Limitation Ordinance (All Defendants). (c) No Cause of Action disclosed (First Defendant only). Circumstances of importance to be considered when laches is raised set out. Applications in so far as they were based on laches refused as the Court was not able to say, having made every possible, sensible allowance in favour of the Plaintiff as to the possibilities that might emerge at the trial, that the applications must succeed. Applications in so far as they were based on delay caught by Limitation Ordinance also refused as Court held that it was not in a position to say that this defence must succeed and that it must, therefore, be left to the trial Judge to determine whether the fraud alleged might have been discovered at a time more than 6 years from the date when the action was brought. The First Defendant's application that Statement of Claim be struck out as it disclosed no cause of action was successful. It was held, as regards the primary relief sought by the Plaintiff, that the facts pleaded did not disclose either an express or resulting trust over the 1st Defendant's assets in favour of the Plaintiff and, further, that the circumstances were such that no Court would intervene and give the alternative relief sought by the Plaintiff which involved stripping the veil of corporate identity.
IN THE SUPREME COURT OF HONG KONG HIGH COURT -----------------
----------------- Coram: Power, J. in Court. Date of Judgment: 16th June, 1981. ----------------- JUDGMENT ----------------- 1. This is an action between the Pao Yuen Tung Hsing Yieh Company Limited, Plaintiff, and four Defendants, namely, Pao Hsing Cotton Mill Limited, the estate of Yang Sen Hui (deceased), the estate of Chang Jye An (deceased) and the estate of Tung Teh Mei (deceased). The Statement of Claim which accompanied the writ was issued on 3rd February, 1981. 2. The facts set out in this pleading and the wording of the claims made therein are of considerable importance and I make no apology, therefore, for setting out the Statement of Claim hereunder in full. STATEMENT OF CLAIM
PART I
3. Establishing the 1st Defendant
PARTICULARS
4. 1st Defendant As Trustee of Plaintiff
PARTICULARS
PART II
PARTICULARS
PART III
5. Getting Rid of the Shareholders
PARTICULARS
PARTICULARS
PARTICULARS
PARTICULARS
Getting Rid of the Directors
PARTICULARS
PARTICULARS
PART IV
PART V
6. AND THE PLAINTIFF CLAIMS: 7. AGAINST THE 1ST DEFENDANT
8. AGAINST THE 2ND DEFENDANT
9. AGAINST THE 3RD DEFENDANT
10. AGAINST THE 4TH DEFENDANT
11. AGAINST ALL DEFENDANTS
12. The 1st Defendant has filed a Notice of Motion alleging that the Statement of Claim discloses no reasonable cause of action against it and that the action is frivolous, vexatious and an abuse of the process of this Court. Notices seeking the same redress have been filed jointly by the 3rd and 4th Defendants and by the 2nd Defendant. All of these Notices of Motion are said to be brought under Order 18, rule 19 of the Rules of the Supreme Court and/or the inherent jurisdiction of the Court. The 2nd Defendant and the 3rd and 4th Defendants raise the same ground of complaint, i.e. that the Plaintiff's claim faces inevitable defeat because of its manifest delay and these Notices can be dealt with together. The 1st Defendant raises not only this ground but seeks to rely also upon the ground that the pleading against 1st Defendant discloses no cause of action. 13. Affidavits were filed in this matter by both Plaintiff and the Defendants. For the defendants, affirmations were made by Madam Chang Chou Min Sun, the widow of Chang Jye An (Mr. Chang) and the administratrix of his estate; Madam Tung Yu Ching Ton, the widow of Tung Teh Mei (Mr. Tung) and the administratrix of his estate; Madam Yang Shum Yuk Sin, the widow of Yang Sen Hui (Mr. Yang) and a director of the 1st Defendant; and Gregory Robert Scott Crichton, a Litigation Legal Assistant in the employ of the solicitors for the 2nd Defendant. The Plaintiff filed two affirmations from a Mr. Fan Tao Tsai (Mr. Fan) a Deputy Director of Commerce of the People's Republic of China and an affidavit from Mr. Hu Ying Choi (Mr. Hu), a former director of the 1st Defendant. 14. I do not consider that it is necessary to canvass all of the facts set out in the affirmations and affidavits but will in due course refer to those which are pertinent to these applications. The applicants conceded, with certain reservations as to paragraph 2 of the Statement of Claim, that for the purpose of this application, they must accept the facts pleaded therein. As to paragraph 2, it was submitted that this was not a pleading of fact but an assertion of a legal consequence and that the Court was not required to act upon the basis that 1st Defendant was "a trustee of the Plaintiff in respect of all its assets" unless there were facts pleaded elsewhere in the Statement of Claim which, if proved, would be sufficient to establish that assertion. 15. It was accepted that the Plaintiff had contributed the whole of the paid up capital to the 1st Defendant, that the 21 persons to whom the shares were issued held them in trust for the Plaintiff and that the original 7 directors on the board of 1st Defendant were the nominees of the Plaintiff. Mr. Scott, Q.C. who appeared with Mr. Denis Chang, Q.C. and Mr. David Yam for 1st Defendant, 3rd Defendant and 4th Defendant, set out the further facts upon which the Plaintiff's case rested as follows:-
16. I accept for the purpose of this application the facts set out by the applicant detailed above. 17. I think it is important also to note at this stage that -
18. As against the 1st Defendant the Plaintiff seeks a declaration that it is entitled to a beneficial interest in the assets of 1st Defendant and consequential equitable remedies. The 1st Defendant submits that the Statement of Claim against it must be struck out as this claim must inevitably fail because of the Plaintiff's manifest delay, i.e. its laches. The 1st Defendant also submits that such a claim is not maintainable and must be struck out as it is neither consistent with nor supported by the facts pleaded by the Plaintiff and is misconceived in legal principle. 19. As against the 2nd Defendant, 3rd Defendant and 4th Defendant, the Plaintiff seeks declarations as to their fiduciary relationship with it and consequential equitable remedies and damages for fraud and conspiracy. The 2nd Defendant, 3rd Defendant and 4th Defendant submit that the Statement of Claim, insofar as it seeks to enforce equitable claims, must be struck out as these claims must inevitably fail because of the Plaintiff's manifest laches. The Plaintiff also seeks damages at common law from these Defendants. As to these claims the Defendants submit that, being based on fraud, they fall under S.26 of the Limitation Ordinance and that because of the Plaintiff's delay, they are caught by that section. It is submitted that they also must be struck out as it is not maintainable that the Plaintiff could not, with reasonable diligence, have discovered the fraud at a time more than 6 years from the date when he brought his action. 20. I intend to deal first, as regards all Defendants, with the submissions that are based upon the Plaintiff's delay. 21. It was common ground that whether the striking out be done under 0.18, r.19 or the inherent jurisdiction of the Court an order could only be made in a "plain and obvious" case. It was submitted, by Mr. Scott, that, while what is "plain and obvious" may vary from case to case, it must always be for the Plaintiff to raise a reasonable cause of action and that the Plaintiff could not be said to have done so if, on facts not in dispute, the claim could not succeed. It was submitted that, in the present case, the claim could not be said to be reasonable as, on the facts not in dispute, the Defendants had defences of laches, to the equitable claims, and defences under the Limitation Ordinance, to the common law claims, which were so clear that the Plaintiff could not possibly make any sufficient answer. 22. A number of cases were cited by the applicant as to general principles with regard to the striking out of the Statement of Claim. The matter, in this regard, is, in my respectful view, best summed up in the words of Lord Justice Megaw in the recent (1980) unreported case of Merlyn Albery-Speyer and Fidel Budden v. 89 Oil Limited and Shell UK Limited, (Copies of the judgments were available to the court and to the parties) where His Lordship said:
23. Mr. Scott bluntly summarised the position by saying that if the case can's succeed it must go. 24. He submitted, and I accept, that this as so not only in circumstances where the claim itself is, for some reason, not maintainable but also in circumstances where a defence, such as laches or under the Limitation Ordinance, is available which must succeed. 25. Mr. Scott cited a number of cases and, upon the basis of those cases, submitted that the circumstances of importance to which the court must look when determining whether or not a defence raising laches was one which must succeed were as follows:-
26. I accept that the above circumstances comprehensively and correctly detail the matters to which a court must have regard when considering the defence of laches. As to the causes of action which were said to be caught by the Limitation Ordinance, Mr. Scott contended that if it was plain that those causes of action could, with reasonable diligence, have been discovered before 1975 then they must be struck out. He then submitted that it could not sensibly be suggested that the Plaintiff, which it was admitted was, in reality, the People's Republic of China, could not with reasonable diligence have discovered the causes of action before 1975. 27. Mr. Lee, when he came to deal with the general principles relating to the striking out, pointed out, quite rightly, that the Court must not allow the matter to become a trial by affidavit. I must, of course, guard against so doing. I bear in mind, in this regard, Mr. Scott's submission that the Defendants were not asking me to touch in any way upon the merits of the Plaintiff's claim but only to rule that the Plaintiff's delay had been so manifest and prejudicial that in the face of a defence raising it, the Plaintiff could not hope to succeed in his claim. Mr. Lee placed particular reliance upon the words of Fletcher Moulton, L.J. in Goodson v. Grierson (1980) 1 K.B. 761, at 764, where he said, when dealing with an application to strike out a Statement of Claim: "All that I say is that, seeing that this action has not reached the stage at which the court can assume that it knows the whole of the facts, it is impossible to say that the plaintiff must necessarily fail to show that his forebearance would, under the decided cases, constitute a good consideration to support the account stated. Having come to that conclusion, it is obvious that this action ought not to be stopped at this stage. It ought to go on until all the facts can be laid before the court, and when the court has cognisance of those facts it can then decide whether there is a proper cause of action." Mr. Scott in his reply sought to distinguish this case by saying that the court was there concerned with the question as to whether or not there was a cause of action and he submitted that, counsel having, in effect, conceded in that action that there might be a cause of action, there was no question but that the matter had to go to trial. I appreciate this distinction, however it does seem to me that the dictum cited is apposite to the present case insofar as it indicates that the Court should not accede to an application to strike out where it is left in the position that it is 'impossible to say that the plaintiff must necessarily fail'. Mr. Lee referred to Spry on Equitable Remedies, 2nd Edition, which states, at page 213, 'laches is established when two conditions are fulfilled. In the first place, there must be unreasonable delay in the commencement of prosecution of proceedings; in the second place, in all the circumstances the consequences of delay must render the ground of relief unreasonable or unjust.' In reply Mr. Scott when dealing with these two conditions submitted, rightly in my view, that it may well be, where there is delay of inordinate length, that from this delay alone the court will be in a position to infer either that the claimant abandoned his claim or that, because of the inevitable changes which must occur with the passage of years, the party against whom the claim is being sought to be enforced must be gravely disadvantaged if called upon to present his side of the matter to a court. 28. I now turn to the facts of the present application. The Statement of Claim alleges in paragraph 16 that 'Since about 1950 YANG, CHANG and TUNG took advantage of the political situation in the People's Republic of China in the 1950's and began a series of breaches of trust culminating in their fraudulent conversion of the Plaintiff's property in the 1st Defendant to their own use and benefit'. The Statement of Claim goes on to set out that by various manoeuvres in 1952 Yang, Chang and Tung brought about 'the wrongful forfeiture of the 45,000 shares' which were held by the 18 shareholders other than themselves. The Statement of Claim later deals with the actions of Yang alleging that he "attempted to deprive the Plaintiff of its control over the 1st Defendant by unilaterally and wrongfully removing the Plaintiff's nominees and agents from the 1st Defendant's Board of Directors and appointing his own nominees or agents to the 1st Defendant's Board of Directors'. This complaint is particularised by allegation that in 1950 Yang requested four of the directors 'to resign from their directorship wrongfully on the ground that they were working for the government of the People's Republic of China'. It would appear that this request was not complied with as it is then alleged that in 1951 3 of those directors were 'unilaterally and wrongfully removed from the 1st Defendant's Board of Directors by YANG ..... although they never agreed to resign from their directorship and the Plaintiff never consented to their removal from the 1st Defendant's Board of Directors'. It is then further alleged that on the 22nd December 1952, the remaining 3 directors who were nominees of the Plaintiff 'were unilaterally and wrongfully removed from their directorship with the 1st Defendant'. 29. It will be seen, then, that the allegations set out that in 1950, 1951 and 1952, Yang, Chang and Tung were acting wrongfully and fraudulently when they forfeited the 45,000 shares and removed the 6 directors from the Board of the 1st Defendant. 30. It is then alleged in paragraph 26 that the Plaintiff only discovered these matters, that is the wrongful and fraudulent actions of Yang, Chang and Tung, in September 1980 when Mr. Fan came to Hong Kong. 31. The argument for the Defendants proceeded upon the basis that there had been a 28 year delay between the date pleaded as the date of the commission of the last of the wrongful and fraudulent acts and the date pleaded as the date of discovery and that these acts were such that they could, with reasonable diligence, have been discovered, had enquiries been made immediately after their commission or at any time in the years thereafter. Involved in this submission is the suggestion that the wrongful and fraudulent acts were apparently wrongful and fraudulent at the time when they were committed. It was submitted that even if the acts were not apparent to the Plaintiff itself they were, at least, apparent to its agents and nominees, namely, the shareholders and directors, and that the knowledge of such persons must be taken to be the knowledge of the Plaintiff. 32. I am prepared to proceed upon the basis that the knowledge of the agents and nominees must be taken to be the knowledge of the Plaintiff but I find myself unable to agree that it must have been apparent to them at the time of its commission that there was some wrongdoing. It was submitted that the Statement of Claim proceeds upon this basis and that the Plaintiff cannot now be allowed to suggest otherwise. I am not satisfied that the Statement of Claim does proceed upon this basis. It alleges that the acts were "wrongful" and "fraudulent" and, in some case, "unilateral" and that they were done without the consent of the Plaintiff. However nowhere in the Statement of Claim is it stated that the wrongful and fraudulent aspect of these acts were apparent to the Plaintiff or its agents or nominees at the time when they were done. This, in my view, is a matter of paramount importance in this application. If the acts were such that, by their very nature, the Plaintiff or its agents or nominees must have realised at the time they were done that they were wrongful and fraudulent or it, at that time, the Plaintiff or its agents or nominees must, at least, if acting reasonably, have been put upon enquiry as to whether or not they were wrongful and fraudulent then the applicants are in a strong position in this application. Might the Plaintiff, knowledge of the acts having come to it, quite reasonably have taken the view that they were being done in its interest, even though without its consent? Might the Plaintiff have taken the view not only that enquiry was not called for at that time but that, if made, might adversely affect both its interests and those of 1st Defendant? I am satisfied, if such might be the case, that the effect of the delay is a matter for the trial judge to determine after hearing all of the facts. 33. I turn now to the facts before me which bear on this aspect of the application. 34. From Exhibit FTT 41, annexed to the affidavit of Mr. Fan, it seems that between 1950 and 1953 'textile factories in Hong Kong which were related to China' were, in order to deceive the United States' Authorities, drawing 'a clear dividing line' between themselves and their China connection. They were not, as I understand the position, in reality, severing their relationship but were severing all apparent links so that they would not be subjected to 'America's embargo on our country'. It seems clear that the Bank of China accepted the need for this and indeed assisted the Defendant Company, and other factories in Hong Kong, to sever their surface connection with the Mainland. It is also clear from the affidavit of Mr. Hu Ying Choi (paragraph 7) that Mr. Yang took such measures in the early 1950's. In it Mr. Hu says that 'in about July 1953 YANG came to see me. He told me that the 1st Defendant experienced difficulties arising out of the said hostile measures imposed on China including the embargo. He discussed with me the possible solutions to those difficulties. He told me that he had earlier in December the previous year reorganised the 1st Defendant and had advertised in newspapers about the forfeiture of the shareholdings of the Plaintiff's shareholders then residing in China'. Mr. Hu says that Mr. Yang asked him to become a director so that the 1st Defendant 'might better deal with the then difficult situation'. Mr. Hu says that he did in fact become a director and he remained one until August 1971. The clear impression, which I gain, from the affidavit of Mr. Hu, when it was read in its entirety, is that he believed when he became a director that the acts of Mr. Yang in forfeiting the shares and appointing him as a director were undertaken not with the view to severing the links with the Plaintiff, which he says to his knowledge had financed the 1st Defendant in Hong Kong, but to ensure that the 1st Defendant was not subjected to the embargo placed on China by the United States. Mr. Hu says that he resigned in August 1971 from his directorship in the 1st Defendant for medical reasons. There is nothing in his affidavit which would indicate that he at any time became aware that Mr. Yang, Mr. Chang and Mr. Tung were acting improperly as against the Plaintiff or that they had used the measures, which Mr. Yang said were taken to avoid the consequences of the America's embargo, to fraudulently seize control of the company. Bearing these matters in mind it seems to me possible that the Plaintiff might have been content to remain silent and to allow the Defendant Company to continue to operate upon the basis that it had no connection with China. Further it seems to me possible that, when so doing, the Plaintiff may have been cognizant of the actions of Mr. Yang but unaware that they were being done for any fraudulent purposes. If that were the case, and it may be so, then the point at which the Plaintiff can be said to have been unreasonable in maintaining that silence and failing to take action to enforce its rights will be a matter to be determined upon the evidence at the trial. 35. In the context of such a situation, it seems to me that the telegram sent by the Plaintiff to Mr. Yang in October 1956 expressing concern for the workers in 1st Defendant in a period of difficulty, which is referred to in paragraph 27(c) of Mr. Fan's affidavit, might well be of greater significance, and that favourable to the Plaintiff, than the applicants were prepared to allow. 36. Given the above I find that if I make "every possible, sensible, allowance, in favour of the plaintiff as to the possibilities of what might emerge on issues of fact" I am unable to say that the defence of laches must succeed. In so ruling I am fully mindful of all of the matters which I have set out above which must be considered when laches is alleged and of the cogent arguments that have been advanced by Mr. Scott with regard thereto. I consider, however, that the merits of the defence of laches can only be properly determined after all of the evidence has been presented at the trial. It may be that in the end the Plaintiff will be unable to answer the defence of laches but I cannot, at this stage, say that this must be so. 37. As to the defence raised under the Limitation Ordinance the applicants seem to me to be in a stronger position but again I am unable to say that they must succeed. I am satisfied that this matter also must be determined by the trial Judge after hearing the evidence. 38. For these reasons the applications of all Defendants, insofar as they rely upon delay, must fail. The 1st Defendant, however, also argues that the Statement of Claim discloses no cause of action against it and asks that it be struck out on this ground. 39. Paragraph 2 of the Statement of Claim asserts that "by reason of the facts hereinafter pleaded" the 1st Defendant is "a trustee of the Plaintiff in respect of all assets held by it". I am in agreement with Mr. Scott's submission that paragraph 2 contains not a pleading of fact but an assertion of a legal consequence. In order to determine whether the Plaintiff is to be allowed to take this assertion to trial one must look to see whether there are facts pleaded which, if proved, might establish it. If there are no such facts then the pleading in this regard is not maintainable and must be struck out. 40. Mr. Scott pointed out that paragraph 3(d) of the Statement of Claim pleads that the 21 nominees of the Plaintiff were to hold the shares which were to be issued in the 1st Defendant after the Plaintiff had contributed the capital to set up the 1st Defendant. He submitted that what the Plaintiff intended to do was quite clear, i.e. to set up a company and to maintain its control of that company by having shares issued to its nominees, and that this is what in fact it did do. He agreed with the contention of the Plaintiff that, in such circumstances, resulting trusts in favour of the Plaintiff would arise with regard to the shares held by he nominees but submitted that such facts laid no basis for a presumption that a trust in favour of the Plaintiff sprang up as regards the property of the 1st Defendant. Mr. Scott contended that the law would only presume a resulting trust in 1st Defendant if there were facts to warrant such a presumption and that in the present case there were no such facts. 41. It was Mr. Lee's contention that the facts pleaded, if proved, would establish not a resulting but an express trust over the 1st Defendant's property in favour of the Plaintiff as the Plaintiff at that time had provided the capital for 1st Defendant and had the intention that the 1st Defendant should hold that capital for it. Upon the facts pleaded I am not persuaded that this can possibly be so. According to the pleading the Plaintiff provided the capital for a company to be set up and then maintained its interest in, and control of, that company by having shares issued to its nominees and by appointing the directors and managerial staff of the company. 42. To support his argument that an express trust would arise in such circumstances, Mr. Lee cited the case of Rochefoucauld v. Boustead (1897) 1 Ch. 196. I do not consider this case has any application to the present circumstances. In that case there was evidence to prove the establishment of an express trust. There is no such evidence in the present case. Indeed, as I have already said, the pleading sets out facts which, if proved, would establish that there was no express trust with regard to the property of 1st Defendant but, rather, a number of resulting trusts which sprang up as regards the shares in 1st Defendant being held by the nominees of the Plaintiff. 43. Mr. Lee went on to argue that if there was no express trust, and I am satisfied there was not, then what arose was a resulting trust. I am satisfied that, on the facts pleaded, no Court could presume that such a resulting trust arose. I am therefore satisfied that there are no facts pleaded which would establish either an express or resulting trust in the property of 1st Defendant such as is contended for by the Plaintiff. 44. Mr. Lee finally argued that if he was not successful in the approaches set out above he was entitled to rely upon an alternative approach which involves the submission that this is a case in which it is appropriate to ask the trial court to lift the veil of incorporation. Mr. Lee submitted that, once it was established that the Plaintiff had provided the capital for the 1st Defendant and that the 3 gentlemen, Mr. Yang, Mr. Chang and Mr. Tung had, by their fraudulent breach of trust owed to the Plaintiff, come into possession of virtually all of the shares of the 1st Defendant, it would be proper for the trial court to lift the veil of incorporation and to order that the property of 1st Defendant be given to the Plaintiff. I find myself unable to agree with this submission. 45. It is important in this context to ascertain the exact point at which Mr. Lee suggests the veil of corporate identity should be lifted. The fact that the Plaintiff provided the capital for the setting up of the Defendant Company can, it would seem, be established simply by proving the facts surrounding the setting up of 1st Defendant. The fact that the shareholders were the trustees of the Plaintiff can be established by proving the facts surrounding the issue of the shares. The fact that Mr. Yang, Mr. Chang and Mr. Tung fraudulently obtained the shares in 1st Defendant can be established by proving what they did at the time of the forfeiture and issue of the share. They, as the then shareholders, would, it is true, have been entitled upon a winding-up at that time to the remaining assets of the company and the position would have been that they would have been holding those assets as trustees for the Plaintiff. The argument seems to be, therefore, that, as it can be proved that the Plaintiff provided the capital for the setting up of the 1st Defendant and it has been deprived of its beneficial interest in that capital by fraud, at this point in time, the Court should recognise what the Plaintiff says is the reality of the situation, strip aside the veil of incorporation, disregard the rights of the present shareholders and order that the assets be given directly to the Plaintiff. 46. It must, in this regard, be borne in mind that the 3 persons against whom fraud is alleged are now dead. Mr. Chang died in 1963, Mr. Tung died in 1966 and Mr. Yang died in 1977. It would appear, from the material before me, that at the time when this action was commenced, the shareholders in the 1st Defendant were as follows:-
47. It seems clear that apart from the 5,022 shares being held by the estate of Mr. Yang, all of the shares have passed into the hands of third parties against whom no wrongdoing is alleged. Would any Court in such circumstances be prepared to "lift the veil" and strip these persons of their equity in the 1st Defendant. The Plaintiff would not be asking the trial Court to lift the veil of corporate identity but to set at naught the whole provisions of the Companies Ordinance. The Court would be being asked to proceed as if those provisions didn't exist in circumstances where there was no contest that the company concerned was a properly established trading company which had over many years dealt with the public at large in its corporate identity. 48. Mr. Lee referred at length to Gower on Company Law, 4th Edition at p.112 et seq. When dealing with this question, it is true, the learned author, at p. 137, states that Courts have been prepared to lift the veil "when corporate personality is being blatantly used as a cloak for fraud or improper conduct". However when he specifically discusses "Fraud or Improper Conduct" (p.126), he refers to 3 cases: 49. Gilford Motor Co. v. Horne (1933) Ch. 935 C.A. 50. Jones v. Lipman (1962) 1 W.L.R. 832 51. Wallersteiner v. Moir (1974) 1 W.L.R. 991 C.A. 52. An examination of these cases makes it clear that the Court has only been prepared to step in to lift the veil when it has been shown that the company was a mere sham set up with the intention to use it to achieve a fraudulent or improper end and in each case the veil was lifted in order to strike at the wrongdoer himself. 53. Such a step is a far cry from the step the Court would be asked to take in the present case. 54. It was Mr. Lee's submission, nonetheless, that as the law is unsettled in this regard and that as an examination of it reveals "no consistent principal beyond a refusal by the legislature and the judiciary to apply the logic of the principle laid down in Salomon's case, where it is too flagrantly opposed to justice, convenience or the interests of the revenue" (Gower p. 112) the matter should be treated as being at large and left to a trial judge to determine after hearing all of the facts. I find myself unable to agree with this submission. I am quite satisfied that no court, in the circumstances here obtaining, could be persuaded to tear aside the veil of corporate identity and order that the assets of 1st Defendant be given directly to the Plaintiff. 55. I am satisfied that there are no facts pleaded which would give rise to either an express or resulting trust and that there is nothing in the facts pleaded which would be sufficient to allow a Court to lift the veil of corporate identity to achieve the end sought by Mr. Lee. I am, therefore, satisfied that the pleading as against the 1st Defendant must be struck out.
Representation: Mr. Martin Lee, Q.C. and Mr. Warren Chan instructed by V.L. Cheung & Co. for the plaintiff. Mr. Richard Scott, Q.C. and Mr. Denis Chang, Q.C. and Mr. David Yam instructed by Johnson, Stokes & Master for 1st, 3rd and 4th defendants. Mr. Denis Chang, Q.C. and Mr. Ronny Wong instructed by Philip K.H. Wong & Co. for the 2nd defendant. |